Not coincidentally, the precious metal peaked the very moment the dollar index attained its latest record low. Also, as with the dollar, gold backed off its latest record this morning, and trades for about $983.
“If you’re worried about the
“Gold demand in
As we’ve noted here in The 5,
esterday, the Dow held steady, after falling 315 points on Friday. Gold rose again – another $11...to $986. It looks like $1,000 gold is only days away, which means that $2,000 gold can’t be far behind. And when it gets here, we know our Dear Readers will be ready. Find out how you can prepare yourself to fully profit from this epic rise in prices here .
This is the big month, when mortgage resets peak out – with nearly $120 billion worth of mortgages being adjusted upwards. Naturally, you’d expect Americans to be feeling pinched...especially with prices of energy and food at record levels.
“Americans start to curb their thirst for gasoline,” says a Wall Street Journal headline.
Car sales fell in February – as you’d expect. Retailers report slower sales. And the economy itself, when last measured, was neither moving ahead...nor retreating, but stock still.
This has prompted a rush to judgment on the part of some critics:
“The Federal Reserve’s Rescue Has Failed,” announces a headline in the English paper, the Telegraph . Ambrose Evans-Pritchard, the paper’s business editor, says, “The verdict is in. The Fed’s emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed.
“Yields on two-year U.S. Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter. The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the
Mr. Evans-Pritchard then brings up
“I never thought I would see anything like this in my life,” said James Steele, an HSBC economist in
“No sane mortal needs to know what term-auction means, except that it too became a tool of the
“Sub-prime debt is plumbing new depths. A-rated securities issued in early 2007 fell to a record 12.72pc of face value on Friday. The BBB tier fetched 10.42pc. The ‘toxic’ tranches are worthless.
“Why won’t it end? Because US house prices are in free fall.”
The article goes on to mention that we are only half way through the mortgage-reset storm . Expect more bad weather, says Evans-Pritchard.
But here at The Daily Reckoning , we are in no hurry to pronounce judgment on Ben Bernanke’s plan to save the
The trouble we seem to be getting is popularly known as ‘stagflation.’ Prices rise, but so does unemployment. It wasn’t supposed to work that way. Inflation was supposed to spur consumers to spend money and businesses to hire people. But people eventually catch on to the trick. They eagerly get rid of money...and prices do rise. But they also come to realize that it’s not a real boom...but a phony boom... So, businesses do not expand...do not hire...and do not earn more money. They raise prices, but their costs go up too.
Still, the ‘stagflation’ label is reassuring to people. Those over the age of 40 can recall the stagflation of the Nixon years. In retrospect, it didn’t seem so bad. But there, too, we part company with most observers. It wasn’t so bad then because
This time, the financial authorities aren’t even opening the medicine cabinet. They’re afraid the patient couldn’t stand the treatment. Instead, they’re administering the old elixir that got the economy into serious problems in the first place – more cash and credit.
Different circumstances...different treatment...we will surely get a different result. Stay tuned...
*** The costs of the credit crunch are mounting up. Each estimate is bigger than the one than before it. The latest estimate from the Union Bank of
*** Remember the Golden Rule: He who has the gold makes the rules.
As nations get rich, typically, they buy gold – or steal it. What else can they do? How else can they protect their wealth?
In 1971, Nixon announced that the
Alas, lose value is just what the dollar did . It went from about $1 down to 5 cents during the 20th century. But the drop was fairly gradual...and other currencies fell along with it – more or less. And the
But now, two things have changed.
First, wealth is shifting away from the
Second, the world is losing confidence in the dollar as never before. Everyone knows the Bernanke Fed can’t defend the buck. There are too many of them. Instead, Bernanke has to try to fight the economic slump – with more cash and credit...further inflating the world’s supply of dollars.
That’s why the dollar index is at its lowest level in 35 years.